NEW YORK (CNN/Money) -
Walt Disney Chairman and CEO Michael Eisner will face a much tougher audience than ornery movie critics this Wednesday: angry shareholders.
Disney investors will be voting at the company's annual shareholder meeting in Philadelphia on whether to re-elect Eisner to the company's board of directors. Few expect him to be ousted at the meeting. But several industry observers expect that at the very least, Eisner may soon have to give up his dual role of chairman and CEO.
Other large companies, most recently Oracle, have decided to split the role of CEO and chairman.
"People are concerned about corporate governance," said David Mantell, an analyst with Loop Capital Markets. "Separating the CEO from the chairman role certainly could help to quell some of the dissent."
But even if Eisner keeps both of his jobs, many on Wall Street expect that a major concern for Disney (DIS: Research, Estimates) going forward will be to find his eventual successor.
Iger or outside help?
One analyst said the easy choice would be to promote president and chief operating officer Bob Iger. "Right now, the board would probably want to say 'Bob Iger.' He has been a public face for Disney," said David Joyce, an analyst with Guzman & Co.
Iger has been with Disney since it bought Capital Cities/ABC, where Iger was president and COO, in 1996. Another analyst agreed that when Eisner's time to leave comes, whether that's in the coming weeks or years, Iger is a natural to succeed him.
"I don't understand why everybody overlooks Iger," said Dennis McAlpine, an analyst with McAlpine Associates, an independent research firm focusing on media stocks. "When people talk about who's the successor, it's like he's not there."
One possible strike against Iger: he's a long-time Disney insider, and so is associated with the problems that have plagued the company in recent years. One Disney shareholder said he would prefer for the board to look for someone else to run the company.
"I think they need to go outside the company and bring in some fresh blood. It's time to move to a new era," said Ted Parrish, co-manager of the Henssler Equity fund. Shares of Disney account for about 2 percent of the fund's assets, Parrish said.
So who could be brought in to be an eventual Eisner replacement? Joyce said the name of Barry Diller, who runs InterActive Corp. (IACI: Research, Estimates), comes up often.
But Diller has taken steps away from Hollywood in recent years, selling his USA Network television and film holdings to Vivendi Universal in 2002, in order to focus more on e-commerce. InterActive Corp. owns travel sites Expedia and Hotels.com as well as Ticketmaster and online financial services site LendingTree.
|Eisner fights for his job
There's been plenty of speculation about other media and tech executives, such as Apple (AAPL: Research, Estimates) CEO Steve Jobs and Viacom (VIA.B: Research, Estimates) president Mel Karmazin, taking over for Eisner at some point. But David Miller, an analyst with Sanders Morris Harris, said people who are spreading this gossip are "completely misinformed."
And another large institutional shareholder did not want to get caught up in the hubbub about Eisner's fate at all.
"Disney is a great company with a tremendous portfolio of media properties. I'm not interested in commenting on management issues," said Bill Nygren, manager of the Oakmark fund, which owns about 1.5 million shares of Disney, according to data from FactSet Research.
Jack Sparrow & Nemo
No matter what happens Wednesday, this is still a critical juncture for not just Eisner, but the entire Disney organization.
Former board members Stanley Gold and Walt Disney nephew Roy Disney are leading a group of dissident shareholders that are trying to oust Eisner. Several pension funds, including those from the states of New York, California, Ohio and North Carolina, have said they will not vote for Eisner.
The company has publicly stated that it expects at least 30 percent of shareholders to oppose Eisner. Still, Disney management has pointed to the strong results from 2003 as a sign that the current leadership team has a solid growth plan in place.
But skeptics point out that although the company had a relatively solid 2003, its profit and stock performance has lagged that of many other media leaders in recent years. Critics add that last year's success was largely in part due to two blockbuster films: "Pirates of the Caribbean: The Curse of the Black Pearl" and "Finding Nemo," which was produced with animated studio powerhouse Pixar (PIXR: Research, Estimates).
And Disney and Pixar's long-time partnership will soon come to an end, raising concerns about the future of Disney's cartoon movie franchise. Apple's Jobs is also chairman and CEO of Pixar. ("Finding Nemo" won an Academy Award for best animated feature film Sunday, defeating Disney's "Brother Bear.")
In addition, cable firm Comcast (CMCSA: Research, Estimates), coincidentally headquartered in Philadelphia, announced a hostile takeover bid for Disney last month. Disney has rejected the offer as being too low.
Comcast has yet to comment on whether or not it intends to raise its bid for Disney. But if Comcast does succeed in taking over Disney, it is widely assumed that Comcast Cable president Stephen Burke, a former Disney executive, would take charge of trying to turn Disney around.
"If Comcast bought Disney, it certainly negates all the discussion of a succession plan for Eisner," Mantell said.
So Eisner should probably get used to sitting in the proverbial hot seat, regardless of Wednesday's outcome.
Analysts quoted in this story do not own shares of the companies mentioned. Guzman & Co. has done investment banking for Comcast.